BlockChain: Re-Imagining the Way We Trust
Trust is a very delicate concept. We trust instinctively, routinely and at times mindlessly in a wide variety of situations. It is the core foundation on which our relationships, our society is built on and very much our commerce. We have come to believe that to transact with you I should trust you. To verify our trust, we use intermediaries. For example, banks ensure that we deal with the right parties with sufficient funds. We rely on lawyers to ensure that our products are not copied or distributed by unauthorised persons. Hence generally, the use of intermediaries is complex, time-consuming and costly and carry many security risks.
Blockchain spins the concept of trust on its head. A simple definition of blockchain would be that it is a publicly distributed decentralized ledger.
Consider how we do business now. Every transaction that we make are tracked using a ledger. At the same time, a similar ledger is maintained individually by all other parties involved in the transaction. Each ledger is non-accessible to other parties. The problem is that maintaining such ledgers are time-consuming and it is prone to error and much likely to be tampered with.
With a blockchain, a universal ledger is maintained and all other participants involved in the transaction have access to it. Every time an entry is made, it is verified by the other participants. Thus, it requires only one real-time entry. Moreover, a new transaction is added on to a chain of pre-existing transactions as a time-stamped block and hence the name blockchain.
To add a layer of security, blockchain is protected by a set of complex cryptographic algorithms and because it follows a chain-like sequence to make any change in one block requires all other blocks to be changed.
Another central feature of blockchain is that the history of each event can be traced back to its origin. This idea is also co-linked to the concept of Smart Contracts.
Applications of Blockchain
Bitcoin is the first application of blockchain technology. As universal ledger maintained by all the participants is the core concept behind blockchain, Satoshi Nakamoto the brain behind it invented Bitcoin as an incentive for its maintenance. What bitcoin and other cryptocurrencies do is that it decentralizes the trust involved in currency. Other applications like File coin application aims to decentralize file storage.
We have just starting to realize the immense potential that blockchain offers. But what is nice and clear is that this technology is going to revolutionize the way we approach business relationships and solves the two problems the internet could not- trust and intermediation!